But not for everyone…
For once, it might actually make sense to buy early, or super late. Airlines, after their worst year, pretty much ever, are ditching their sales playbooks. Step one brought the removal of pesky change fees, but step two is a seismic shift on the flying dance floor. Airlines will adopt a style of pricing much like Uber does with car service, where prices can shift in minutes, rather than days.
It sounds big, it is big, so here’s everything you need to know. This new change could be your ticket to the best flight deal ever, or a new way to get an extra dollar out of you than the person that booked just seconds before.
Continuous “Dynamic” Airline Pricing
Most things in the world revolve around a simple economic concept: supply, and demand. Airline tickets have been a unicorn, which revolve around the egos of the revenue managers – aka the people who set prices – and bullish CEO’s. There was probably a side dish of supply and demand in there, but not always.
Think: airlines with tons of last minute supply, still trying to charge outrageous prices.
GSTP warned years ago that a day when two people, looking at the exact same time could see different prices in the near future, and on some airlines that day is here. It’s widely expected more airlines will follow by the day.
Things like the history of what you’ve been willing to pay, or your previous clicks on upgrade offers could factor into prices displayed just for you, and you alone.
Flight Pricing: A Backstory
Logic in the pricing of flights has almost, almost, been impossible to predict. It’s why there is no “magic day” to book flights, except when a flash deal pops up that you know is incredibly low, you simply must act. That’s changing, kind of.
Airlines are looking at ways of filling planes up again, but are hoping clever knew responsive systems will squeeze a few extra lemons out of each flight. They’re getting smarter about how they do so. That means a shift from weekly fares to of the minute pricing changes, just like hailing an Uber right after a big game, or at 11PM on a Friday night.
For as long as time, airlines filed very specific fares out of specific cities, each with different rules, start and end dates, and that gets really complicated, because it’s like cooking. There’s always a timer (city deal) you need to turn off, another (city deal) to turn on, etc.
Sometimes airlines would sell “too many” cheap fares when they could’ve squeezed an extra few bucks out of someone, other times not enough.
It gets even more complicated when other competing airlines launch flash sales from cities where you’d like to make an impact, and airlines need to respond quickly to try and funnel some of that business their way.
So, to take the pressure off human factors like setting fares, airlines are using new automated technology to identify when there’s a great competing fare in the market, and quickly adapt to match it for you, or maybe even beat it.
Like Uber, sadly, it’ll also know when demand begins to surge, and will charge you a higher fare accordingly. It’s going to be the best and worst thing that happened to travel, in part because the rule book could be largely torn up, if widely adapted.
According to Skift, Air France and KLM are the latest major airlines to take the full plunge into this new foray of flight pricing, which is part of ‘NDC’. Lufthansa, British Airways and other IAG airlines are also in a ‘lite’ testing phase.
For most people, ignore this ‘NDC’ chat, but be peripherally aware of it, because it’s the airline industry term for ‘new distribution channel’ of sales, and only some systems airlines operate can handle it. It’s inside baseball, but it’s a big change.
What matters is that the airlines say they are squeezing more money out of each flight with the new ‘NDC’ channel than with previous booking systems.
That’s likely because rather than having 40 tickets available at $300 round trip, the system could quickly see demand in a trend, and make the first ticket sold $280, the next $290, the next $300, then $301 and so forth.
On the net, some people would secure greater deals than ever (say, below the $300 threshold of a previous low price), but the airline would get that incremental few bucks out of each subsequent seat (say $365) to make a sum greater than 40 x $300.
Naturally, like Uber, everything is a constant test in pricing, so much data is gained. In in the process demand seemed to fall off a cliff, the system could throw some bargain basement fares out and start again. It’ll be interesting to see if consumers find a way to game pricing, or whether, like Uber, the system beats consumers.
The drivers always seem to win, somehow. So far, it’s being touted in the near term as a win for travelers though. Accelya, a provider of this new software told Skift…
“Price competition is going to be fierce as airlines fight to win back customers. So price sensitivity will be extremely volatile in the marketplace. One thing continuous pricing does is it offers a much more instantaneous and fine-tuned reaction to shifts in customer willingness to pay.”
Fare Wars To A New Level
Crucially, airlines will be able to opt in to competing in fare wars launched by other airlines faster, which is good news for loyalists to certain airlines.
Previous systems meant if an airline put out a hot flash sale in business class for $1000, it could take days before another airline would match that price, if at all. Now, they’ll be able to jump on the bandwagon in seconds. You should almost pray that a competitor or your favorite airline starts testing the waters in your preferred cities.
For fans of “mistake” or “error” fares, which are often actually neither of those descriptors, and instead are great PR exercises in viral travel demand, it’s bad news, sadly. Airlines will be able to pull a fare they no longer wish to offer in seconds, rather than hours or days. It’ll truly be a fastest finger contest.
But… you may see more of them, just to stoke interest.
If you love one airline but see a great deal on another, this new system will mean you should probably hang around for a few minutes to see when your preferred airline matches that price. They want to hold onto you as a customer more than ever, which means they’ll be fighting harder on price to do that.
Throwing Out Flight Booking Rulebook?
With airline tickets there’s never been one magic day, or tip, to secure truly great flight deals, other than following sites which highlight them in a timely manner. The general advice for buying a paid (rather than points) ticket was still simple though.
- Set free price trackers
- Don’t book too early
- Don’t book too late
- Jump on a great deal.
Now, the early bird may truly get the worm. Demand has to start somewhere, so airlines may have some super early bird, ultra low fares to kick the party off. If you’re sitting there 355 days ahead, you may get the lowest price of anyone on the plane.
That’s rarely been the case, historically.
Conversely, the person who sits and waits until the last minute may not be as brutally punished for doing so as before. Airlines may offer more reasonable prices at last minute junctures, since making $500 for a last minute seat is better than charging $2000 for a seat with no uptake. The algorithm will decide, just like Uber.
But hey, if you’re trying to leave Miami during Art Basel, that last minute sting may be worse than ever, just like trying to leave a Lady Gaga stadium concert in an Uber as the final note is played. It’s a bold new year for airlines and travelers, so watch this space.
So you shout down to the wife and kids “Do we want to go to xyz in June ?”
They take 12 seconds to think about it, by which time the price has gone up £800 and you now can’t afford it.
Great.
And the kids now want to go and will moan they can’t.
Brilliant advance !
” Things like the history of what you’ve been willing to pay, or your previous clicks on upgrade offers could factor into prices displayed just for you, and you alone. ”
Roll on the disgraceful rip-offs 🙁
Many there may be, but so too may there be offers to higher cabins no one else gets. There will be more winners and more losers.
It’s really interesting how more airlines are moving to a “continuous” pricing model, distancing themselves from the antiquated practices they have known for so many years. I agree that competition is going to be fierce as travel opens up once again. We’ve already seem that with airlines running generous “bonus points” offers in the past week alone!”
It beggars belief that the BA executive are willing to trust their profits to an IT system given their track record.
In combination with their anti-customer policies and inability to deliver what they market, is this the beginning of yet another raid on tax payers monies for the corporations benefit?
Do you think that airlines or others track any inquiries you may have made a few days beforehand and, therefore knowing you are serious in buying, ramp up the purchase price for you. Would incognito inquires prevent this tactic?
It’s an interesting change because incognito could work for, or against you (whereas presently it’s a myth that it does anything). If it sees you’ve mulled the purchase for days, it could offer a small discount to get you to just go ahead, whereas incognito it might not. Will be a minefield.
Might be a good idea but then all JV pricing and alliances need to be eliminated as well, so there is a competition. Between Uber and Lyft there are only two in most cities as taxis are price regulated.